Emerging market currencies are expected to outrun the impending Federal Reserve interest rate hikes.
The fear is that the higher interest rates would cause emerging market currencies in Asia, Latin America, and Africa will weaken against a stronger dollar.
However, investors are optimistic that currencies, specifically the Russian ruble, South African, rand, Turkish lira, and Brazilian real, will outlast developed currencies like the Euro and Japanese yen against an interest rise.
“Emerging-market currencies have not always underperformed during Fed tightening cycles and we do not expect them to do so this time, even as U.S. rates rise further than is generally anticipated,” said David Rees, a senior markets economist at London-based Capital Economics.
Emerging markets like Russia and Brazil mainly rely on commodity exports as significant drivers of growth and outperform expectations against US rates.
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